Home Buyer Tax Credits in Maryland and D.C.
State Transfer Tax Credit in Maryland
The State of Maryland provides a credit to first-time home buyers at the time of purchase by exempting them from paying the buyer’s portion of the State transfer tax, which is 0.25% of the sales price. The State transfer tax is 0.5% total, typically split 50-50 between the buyer and seller. The State of Maryland waives the buyer portion of 0.25% for first-time Maryland home buyers. Contact us to see if you qualify for this credit.
Homestead Tax Credit in Maryland
The Homestead Property Tax credit was established to reduce the property tax burden on homeowners. It provides an initial credit of $692 and also limits the taxable assessment increases to a certain percentage or less each year on a principal residence in Maryland. The percentage increase allowed varies by County. Even if the property value increases by more than the allowed increase percentage, the homeowner will not pay taxes on any market increase over that amount.
For example, in Montgomery County the property tax increases are limited to no more than 10%. If your property assessment rose from $350,000 to $400,000 in one year (about a 14% increase), the property tax is calculated on the full assessment, but you would receive a homestead credit on your property tax bill for the amount over 10%. You would only pay taxes on $385,000 (a 10% increase over $350,000) and a tax credit is then applied to the remaining $15,000 of property value.
A homeowner can receive the tax credit on only one property, their principal residence. They must reside at that property for at least six months of the year during which they are claiming the credit. In addition, there is a one-time application that all homeowners must submit to establish eligibility for the credit. At closing, we provide to the new homeowner a sample application with instructions on how and when to complete it. Contact us for more information.
First-Time Home Buyer Credit in Washington DC
For qualified first time homebuyers in the District of Columbia, the recordation tax rate will be reduced when purchasing an eligible property. To qualify, the household income cannot exceed certain thresholds. For instance if there are 4 persons in the household, the income limit is $218,340. A one person household cannot exceed $153,000. In addition, the purchase price cannot exceed $647,000. A first time homebuyer for purposes of this credit is defined as an individual purchaser who has never owned an eligible property as the individual’s principal residence. Each person named as the grantee in the deed must qualify. For more information or to submit an application, use the link below.
District of Columbia Homestead Deduction and Senior Citizen or Disabled Tax Relief
The Homestead deduction reduces a real property’s assessed value by $74,850 ($636.23) prior to computing the yearly tax liability. The senior citizen or disabled tax relief reduces the tax bill by 50 percent. The Homestead benefit is limited to residential property. To qualify:
An application must be on file with the Office of Tax and Revenue;
The property must be occupied by the owner/applicant and contain no more than five dwelling units (including the unit occupied by the owner); and
The property must be the principal residence (domicile) of the owner/applicant.
Senior Citizen or Disabled Property Owner Tax Relief
When a property owner turns 65 years of age or older, or when he or she is disabled, he or she may file an application immediately for disabled or senior citizen property tax relief. This benefit reduces a qualified property owner's property tax by 50 percent. If the property owner lives in a cooperative housing association, the cooperative will supply and collect the applications. The following guidelines apply:
The disabled or senior citizen must own 50 percent or more of the property or cooperative unit;
The total TY 2017 federal adjusted gross income of everyone living in the property or cooperative unit, excluding tenants, must be less than $133,100 for the 2019 calendar year; and
The same requirements for application, occupancy, ownership, principal residence (domicile), number of dwelling units, cooperative housing associations and revocable trusts apply as in the homestead deduction.
To apply, a homeowner must submit Form FP-100 Homestead Deduction, Senior Citizen and Disabled Property Tax Relief Application. https://www.taxpayerservicecenter.com/FP100_Homestead_Application.jsp
At settlement, we provide to the purchaser a completed application and as a courtesy, will submit to DC after approval by the new homeowner.
If you have any questions about any of the home buyer credits, please contact us at
301-610-7777 or by email at firstname.lastname@example.org.